acalculator

What is my NOPAT?

Enter operating income (EBIT). Then type a tax rate, or enter income tax expense and income before taxes from the income statement to use the effective rate.

Your numbers

Tax rate from
NOPAT
$36,707.32

Operating income of $43,000.00 at a tax rate of 14.63% leaves NOPAT of $36,707.32.

Taxes on operating income
$6,292.68
Tax rate used
14.63%

NOPAT: $36,707.32. Operating income of $43,000.00 at a tax rate of 14.63% leaves NOPAT of $36,707.32.

The results are estimates for information only. They are not financial, tax, or legal advice. Check the numbers with your lender or a qualified professional before you decide. Terms of use

How to calculate

Computes NOPAT (net operating profit after taxes): operating income (EBIT) times one minus the tax rate, from a typed rate or the effective rate.

Example with the default inputs (Operating income (EBIT) $43,000.00, Tax rate from Income taxes, Income tax expense $6,000.00, Income before taxes $41,000.00): Operating income of $43,000.00 at a tax rate of 14.63% leaves NOPAT of $36,707.32.

Method: Tax rate = the rate typed, or income tax expense ÷ income before taxes. NOPAT = EBIT × (1 − tax rate). Taxes on operating income = EBIT × tax rate.

  • The tax rate applies to all of operating income; an operating loss is taxed at the same rate (it saves tax).
  • The effective rate comes from the same income statement as EBIT.
  • Arithmetic is exact on the typed decimals; money shows to the cent and the rate to 2 decimals, halves up.

Machine-readable copies: Markdown, JSON.

Worked examples

Each example is checked against the calculator on every build.

  1. Operating income (EBIT) $43,000.00, Tax rate from Income taxes, Income tax expense $6,000.00, Income before taxes $41,000.00 gives NOPAT $36,707.32, Taxes on operating income $6,292.68, Tax rate used 14.634146%.Source: Aswath Damodaran, NYU Stern, Variables used in Data Set (after-tax operating income = EBIT (1 − t), the numerator of return on capital and free cash flow to the firm). https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/variable.htm; OpenStax, Principles of Finance, 5.1 The Income Statement (Clear Lake Sporting Goods: operating income $43,000, interest $2,000, income tax expense $6,000, net income $35,000). https://openstax.org/books/principles-finance/pages/5-1-the-income-statement
  2. Operating income (EBIT) $1,000,000.00, Tax rate from A tax rate, Tax rate 21% gives NOPAT $790,000.00, Taxes on operating income $210,000.00, Tax rate used 21%.Source: Aswath Damodaran, NYU Stern, Variables used in Data Set (after-tax operating income = EBIT (1 − t), the numerator of return on capital and free cash flow to the firm). https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/variable.htm
  3. Operating income (EBIT) -$50,000.00, Tax rate from A tax rate, Tax rate 25% gives NOPAT -$37,500.00, Taxes on operating income -$12,500.00.Source: Aswath Damodaran, NYU Stern, Variables used in Data Set (after-tax operating income = EBIT (1 − t), the numerator of return on capital and free cash flow to the firm). https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/variable.htm
  4. Operating income (EBIT) $2,500,000.50, Tax rate from A tax rate, Tax rate 26.5% gives NOPAT $1,837,500.37, Taxes on operating income $662,500.13.

How it works

  • Tax rate = the rate you type ÷ 100, or income tax expense ÷ income before taxes (the effective rate)
  • NOPAT = EBIT × (1 − tax rate)
  • Taxes on operating income = EBIT × tax rate

Rules:

  • EBIT may be negative (an operating loss) and is at most $1 quadrillion in size. A typed tax rate is 0% to 100%.
  • For the effective rate, income tax expense is $0 or more and income before taxes must be more than $0. Tax expense larger than income before taxes gives no answer.
  • A result that is not 0 but too small to show as a number gives no answer.
  • The arithmetic is exact on the decimals you type. Money shows to the cent and the rate to 2 decimals, with halves rounded up (away from 0).

Assumptions

  • The tax rate applies to all of operating income. An operating loss is taxed at the same rate, as if it saves tax; enter 0% if it does not.
  • For the effective rate, the tax expense and pretax income come from the same income statement as EBIT.

Worked examples by hand

Clear Lake Sporting Goods. Operating income $43,000; income tax expense $6,000 on income before taxes of $41,000. Effective rate = 6,000 ÷ 41,000 = 14.63%. NOPAT = 43,000 × (1 − 6,000 ÷ 41,000) = 43,000 × 35,000 ÷ 41,000 = $36,707.32. Taxes on operating income = $6,292.68.

A 21% tax rate. EBIT $1,000,000: NOPAT = 1,000,000 × 0.79 = $790,000, after $210,000 of tax.

An operating loss. EBIT −$50,000 at 25%: NOPAT = −50,000 × 0.75 = −$37,500.

Decimals. EBIT $2,500,000.50 at 26.5%: NOPAT = 2,500,000.50 × 0.735 = $1,837,500.3675, shown as $1,837,500.37.

Other questions people ask

What is NOPAT?

NOPAT, net operating profit after taxes, is what a business would earn from its operations after tax if it had no debt. It takes tax off operating income (EBIT) but ignores interest, so it shows the profit available to lenders and shareholders together.

How do I calculate NOPAT?

Multiply operating income by 1 minus the tax rate. EBIT of $1,000,000 at a 21% tax rate gives NOPAT of 1,000,000 × 0.79 = $790,000.

Which tax rate should I use?

The effective rate from the income statement (income tax expense ÷ income before taxes) shows what the company actually paid. Clear Lake Sporting Goods paid $6,000 of tax on $41,000 of pretax income, an effective rate of 14.63%. Analysts also use the statutory rate set by law, or the marginal rate on the next dollar of income.

How is NOPAT different from net income?

Net income is after interest, so it depends on how much the company borrowed. NOPAT leaves interest out. Clear Lake's net income was $35,000, but its NOPAT, at its effective rate, was $36,707.32.

What is NOPAT used for?

NOPAT is the top of return on invested capital (ROIC = NOPAT ÷ invested capital) and the starting point of free cash flow to the firm. Comparing NOPAT with a charge for the capital used gives economic profit.

Can NOPAT be negative?

Yes, when operating income is a loss. This calculator applies the same rate to a loss, as if the loss saves tax: an operating loss of $50,000 at 25% gives NOPAT of −$37,500. If the loss saves no tax, use a 0% rate.